18 June 2025
If you are covering the latest inflation data for the UK, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“This morning’s inflation figures show headline CPI rising by 3.4% in the year to May. Core inflation—which strips out energy and food—now stands at 3.5%, continuing to ease, and providing the Bank of England with a mixed picture ahead of its rate decision tomorrow.
“While inflation has steadily declined from its double-digit peak, today’s data reinforces just how tricky the final stretch of disinflation can be. Price pressures in the services sector remain elevated but have slightly cooled from 5.4% to 4.7%. But geopolitical tensions in the Middle East, could inject further volatility into the path ahead. Data integrity issues, such as the recent 0.1 percentage point overstatement in April’s estimate due to vehicle tax misreporting, have also heightened uncertainty regarding the reliability of key indicators.
“The Bank of England is widely expected to keep interest rates on hold this week, regardless of today’s inflation print. The situation in the Middle East and its potential to drive further energy-related inflation means policymakers will be wary of cutting rates too soon. Greater clarity on the inflation outlook will be needed before the Bank feels confident enough to make its first move.
“Markets are still pencilling in a rate cut in August, but if inflation proves stubborn or global risks intensify, the Bank may be forced to wait. For investors and households alike, this period is a reminder that we are not out of the woods just yet.”
